New opportunities are revealed by regional trends in health insurance, EVs, and cyber.
Gallagher Re’s 2024 Asia Pacific Market Watch, which was compiled from both publicly accessible data sources and internal client advocates, offers insights into the trends in the insurance sector in the region.
The research outlines the potential and difficulties facing insurers in the Asia-Pacific region, encompassing 14 developed and emerging markets.
Key factors influencing market dynamics were underlined by the reinsurance broker, such as changes in regulations, economic patterns, and technological breakthroughs, all of which have an effect on insurers’ resilience and adaptation.
The Asia-Pacific region exhibits tremendous potential despite major obstacles, especially in the areas of cyber insurance, electric vehicle (EV) coverage, and accident and health insurance.
The continued shift in global economic activity towards Asia-Pacific continues to position the area as a key driver of the expansion of the global insurance business, while economic recovery is driving up demand for creative risk solutions.
Technological and digital developments have also aided in the expansion of the auto insurance, cyber insurance, and accident and health insurance sectors, particularly for electric vehicles. In response to growing cyber dangers, markets like Malaysia, Singapore, Australia, and New Zealand have seen a surge in demand for cyber coverage.
APAC’s cyber insurance sector is growing at an annual rate of 50%, representing 7% of the global cyber insurance market as of January 1, 2024.
With 41% of premiums, motor insurance still dominates APAC’s non-life market, although EV insurance is gaining more attention as a result of the recent surge in EV purchases. China, Taiwan, and Singapore are among the nations now creating laws especially for insurance products pertaining to electric vehicles.
Increased wellness awareness and growth in the insurtech industry are predicted to fuel growth in accident and health insurance, which accounts for 11% of non-life premiums.
Inflation and catastrophes
In APAC, the non-life insurance industry has been affected by inflation, particularly in main markets for medical, property, and auto insurance. While insurers in tariffed countries, like Indonesia and the Philippines, have seen pressure on profits as pricing lags behind rising costs, insurers in deregulated markets have changed rates to keep up with inflation in claims costs.
Due to the inability of reinsurers to match prices in tariffed markets, this discrepancy has caused a rift between primary insurance and reinsurance. Cedants at renewals are facing additional financial strain due to a combination of rising costs in a tougher market and capacity reductions for proportionate treaties in the reinsurance sector.
Insurers and reinsurers, however, are more assured of their capacity to price for inflation in short-tail lines now that underlying inflation has stabilised.
The Asia-Pacific region is still extremely susceptible to typhoons, earthquakes, tsunamis, and flooding, among other natural disasters. Natural disaster damages have increased as a result of rising property values in high-risk metropolitan locations, like China and India.
In response to climate-related threats, regulatory agencies are taking steps to encourage a low-carbon economy, which may have far-reaching effects. Guidelines for a 2024 Climate Risk Stress Testing Exercise for financial institutions have been released by Malaysia’s regulatory body, BNM, and comments are due in 2025.
Beginning in 2025, Singapore’s parliament has also required climate-related reporting that complies with IFRS’ ISSB criteria.
Notable natural catastrophe events in 2024 include the Noto earthquake in Japan in January, with insured losses estimated at $1.2 billion, and the Hualien earthquake in Taiwan, with approximately $1 billion in insured losses.
Typhoon Yagi also resulted in $400 million in insured losses in Vietnam, and around $1 billion across the Philippines, China, Vietnam, and Lao PDR.
APAC regulatory advancements
Although timetables vary by jurisdiction, regulatory developments in the APAC region are demonstrating progress with the implementation of IFRS 17. While some markets have extended deadlines to 2025 and beyond, South Korea, Hong Kong, Malaysia, Singapore, Australia, and New Zealand implemented IFRS 17 in January 2023. With the introduction of China-ROSS II in 2022, Korea ICS in 2023, and Hong Kong RBC in 2024, the region’s solvency regimes are also changing.
By 2025, Japan is anticipated to adopt a Solvency II-style system, while Australia’s APRA has synchronised its capital structure with IFRS 17. Additionally, markets like Taiwan, Vietnam, and India are getting ready for new accounting standards, which will complicate the regulatory environment and force insurers to improve their capital, data, and risk management capacities.
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